The fallout from the violence at the U.S. Capitol continues to reverberate far beyond politics. In the business sector, companies are taking actions that make clear that free and fair elections and the peaceful transfer of power lie not only at the heart of our constitutional democracy, but are also core values of American business. For corporations and trade associations that have traditionally engaged in the political space by maintaining a political action committee (PAC), the current moment presents new challenges for staying involved in social and political issues without being seen as endorsing officials who invited the Capitol violence through their words and conduct.

The following update provides a menu of options that corporate and trade association PACs can choose from to ensure their actions are aligned with democratic ideals and their PAC donors’ values. These options generally fall into one of two categories: changes to the ways in which the PAC contributes to federal candidates, and other actions aside from (or in addition to) changes to federal political giving that companies and their PACs can take to stay politically involved while championing democratic norms.

Changing How the PAC Contributes to Federal Candidates

Among those PACs that have taken action in the wake of January 6, the most common response has been to suspend federal political contributions entirely, or to suspend contributions to a subset of officials—such as those who voted against the certification of the presidential election results. PACs looking to modify or restrict their PAC giving strategies have several options.

• Suspend or Terminate Political Giving. PACs are generally free under the law to entirely suspend political giving. Nothing in federal campaign finance law or Federal Election Commission (FEC) regulations requires that a PAC that is soliciting contributions and has cash on hand must be active in political giving. PACs also have the option of shutting down entirely, provided they adhere to FEC rules on how to properly dispose of residual funds and formalize the PAC termination.
• Restrict Who Gets Contributions. PACs are also generally free to place restrictions on which candidates are eligible to receive PAC contributions, and they have several options for doing so. The first option—which several corporate PACs have already taken—is to publicly declare that the PAC will not make contributions to certain candidates or categories of candidates. Alternatively, PACs that desire the flexibility to solicit both restricted and unrestricted contributions from donors may explore establishing two accounts within their existing PAC (one for restricted funds, one for unrestricted) or expanding to operate two affiliated PACs.
• Let Donors Choose Who Gets Contributions. Rather than PAC officers deciding which candidates will or will not receive contributions, PACs can instead allow their donors to “earmark” or designate exactly which candidate should receive their individual contributions. PACs that accept earmarked contributions will be subject to special “conduit” compliance requirements under FEC rules, including a rule that the PAC cannot assert any direction or control over the contribution outside the contributor’s wishes. A PAC that adheres to the conduit requirements can collect and forward an unlimited number of donor-earmarked contributions to a given candidate (which would count against the donor’s limit to that candidate) and still make a $5,000 contribution in the PAC’s own name to that same candidate.

Other PAC Changes to Help Navigate the Current Moment

PACs looking to find creative ways to stay active in the political space have several options aside from (or in addition to) changing how they contribute to federal candidates and officials. The following are a few examples:

• Change the PAC’s Name. A corporate or trade association PAC is generally free to change its name at any time, provided it meets the requirement that the company’s name must appear somewhere in the PAC’s name. Several corporate PACs have already taken this step after January 6, adopting monikers to emphasize that PAC funds come from voluntary employee contributions and not corporate coffers. PACs are required to notify the FEC of any name change, and, depending on the PAC’s structure and activities, will likely need to take additional steps with other federal and state agencies, the PAC’s bank, and other entities to effectuate the change.
• Increase PAC Transparency. Filing FEC reports disclosing PAC donors and contributions represents the floor—not the ceiling—for corporate political transparency. The CPA-Zicklin Index of Corporate Political Disclosure and Accountability applies 24 separate metrics to assess corporate political transparency and assigns a score of 0 through 100 to every company on the S&P 500. CPA-Zicklin publicly discloses the metrics it uses, which means companies can take specific, targeted steps to increase transparency that may also result in a higher score on the CPA-Zicklin’s next publicly issued report.
• Focus on Charitable Contributions. Now maybe a good time for corporations or trade organizations with federal PACs to consider launching a charitable matching program. The FEC allows companies to use corporate funds to match all or a portion of a donor’s PAC contribution with a corresponding donation to charity on the donor’s behalf. Thus, a “PAC Match” program can be a way to encourage continued PAC donor engagement while also supporting non-political charitable causes.
• Support State and Local Candidates Instead. Some states allow federally registered corporate and trade association PACs to contribute to state and local candidates using existing PAC funds. While additional state-level compliance requirements may apply, shifting support to candidates who are closer to home may be a good option as companies reevaluate their political giving at the federal level.

A Note on PAC Bylaws

There is no requirement that a PAC have bylaws or any other governing document. However, PACs that currently have bylaws in place and are contemplating any of the actions discussed above should ensure that any change to PAC operations is done in a way that comports with the PAC’s governance rules.

PACs that don’t currently have bylaws can adopt bylaws or another formal governance structure at any time—and should strongly consider doing so. Adopting a governing document is a chance to codify the PAC’s criteria for making contributions going forward. Bylaws can also set out the duties and responsibilities of PAC officers and define how PAC board or committee members are named. Finally, bylaws can help ensure accurate FEC reporting and even protect the PAC from liability in some circumstances by setting out certain internal financial controls.

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